[Al Khabir]

The question is (brought foward from "confucian communism" in Political circus) could a centralised economy work? I personally believe it can, from the evidence of teh industrialisation of Russia. What do you all think?

[arcis]

One of the system errors planned, ordered or centralized economy is the power of bureaucrazy. Everybody knows them from the administration and their style of working. The strength of bureaucrats is the weakness of economy. Whenever you have to fill out 3 formulas to get a pencil, you should leave this doomed company.

What was missing in planned economy is the willingness better yet, the necessity to respond to the signals of the markets. A capitalist firm responds to changing prices because failure to do so will cause it to lose money. A socialist ministry ignores the situation because bureaucrats learn that doing something is more likely to get them in trouble than doing nothing, unless doing nothing results in absolute disaster.

[Al Khabir]

I always believed that under the planned economy, there would be no "markets", and if there were, the government would be in a better position to regulate them and to make sure there is no depression.

[arcis]

I and some friends of mine visited Leipzig, second biggest city in East Germany in may 1990 some months after the fall of the "wall" . I have seen the results of planned economy. The rooten infrastructure in the city, the dilapidated buildings and factories, the ridiculous "Trabbis" (cars with two-stroke engine) and their stinking exhaust fumes. In the late 80's the planned economy in East Germany was definitely at its end. I think at this point of time the economic situation in east germany was at least 25 years behind west germany.

Now we have to clean up the mess. Since the reunification of our country in 1990 the money transfer from west germany to east germany amounts to
60 Billion Euro ( 70 000 000 000 $ ) EVERY YEAR. Therefore the politicians invented a new tax, which is called solidarity tax. And some weeks ago they told us, that we have to pay this tax at least 15 another years to get the standards in east germany to the same level of west germany.

Maybe you see, that I am a little bit biased concerning the "planned economy". In my view, it is a proven fact, that the planned economy will not work. Planned economy doesn't take into account, that human beings have a natural talent for laziness.

[Truth-a-naut]

The old days of centralized this and centralized that failed because of what was stated before... bureaucracy.

But back then they didn't have the immense organizational powers of computers. One computer can eliminate 20 or even a 100 fat bureaucrats.

[Al Khabir]

And that from a man who says that communism is boring... well argued!

Centralised economies have failed in the past because of bad management. I think that the argument on human laziness probably belongs in the Communism forum though... not that they are lazy of course...

[Todd D.]

The basic principle for GDP is Consumption+Investment+Government Spending+(Exports-Imports). An increase in this is generally considered to be growth. When you increase government spending (centralized economy), you must therefore take money from somewhere else, usually the private sector (consumption and investment). The result of this is that you generally have to either rely more heavily on Exports (which increases the national debt) or you decrease private spending, which decreases the incentives for businesses to prosper. Depends on what your objective is, but if the objective is to stimulate economic growth, then Centralized economies have been proven to be counterproductive.

[Siberian Fox]

When you increase government spending (centralized economy), you must therefore take money from somewhere else, usually the private sector (consumption and investment).

You are still talking about free market Western countries, not command economies. In a command economy there is no "private sector".

The result of this is that you generally have to either rely more heavily on Exports (which increases the national debt) or you decrease private spending, which decreases the incentives for businesses to prosper.

Where on earth did you get this notion from? Please explain.

Command economies do not grow by exporting and 'accumulating national debts' (Side note: in any event exports mean revenue not debt) they grow like all economies, by investment.

The basic principle for GDP is Consumption+Investment+Government Spending+(Exports-Imports).

You seem to be forgetting that in a command economy (or command elements of Western economies) Investment and Government Spending are not mutually exclusive. Indeed, in a pure command economy all investment is government spending. The great (theoretical) advantage of the command economy is that the government can take the conscious decision to invest a higher proportion of GDP and thus actually achieve faster growth than a market economy. This is demonstrated by the USSR under Stalin, which grew at a faster rate than the recession hit economies of the capitalist West during the inter-war years.

Whether faster growth can be sustained in practice in the long run is another matter all together, and one that the world's command economies seem to have failed in for reasons varying wildly depending who you ask.

[unbalanced zealot]

I recently passed a huge hardware warehouse outlet called
Bunnings - that is in virtually every Australian city and
regional centre. It's economy of scale - capitalist style.
It's everywhere.

Isn't this similar to how things would be centralised economy?
Just different people in charge and marginally more competition.